Only 44% of 567 listed Sydney properties sold at the weekend – a figure likely to be revised to below 40%.
Photograph: Sam Mooy/AAP

Sydney’s housing market is facing the toughest conditions since the global financial crisis after auction rates slumped again at the weekend, with analysts predicting that the slowdown could get much worse in the months ahead.

Australia’s biggest city saw only 44% of 567 listed properties sold at the weekend, according to Domain, the lowest preliminary clearance rate for a decade. The figure is likely to be revised down below 40%, a level of downturn not seen for a decade.

The last time rates were in the 30% range was November 2008, at the peak of the global financial crisis. The two instances before that were May 2004, when New South Wales introduced vendor stamp duty, and July 1989, when interest rates were 17%.

House prices to fall 20% in Sydney and Melbourne, says top economist

Read more

Equally striking is the collapse in the total amount changing hands at auctions across the city, which sank to $160m at the weekend compared with $484m on the same weekend a year ago – a drop of about two-thirds.

The clearance rate in Melbourne at the weekend was below 50% on a much greater number of properties (nearly 1,000).

But the dollar volume of auction sales shows a similar decline across the country, where buyers spent $453m at the weekend compared with $1.3bn the same weekend last year.

The news comes as Commonwealth Bank reported on Monday that economy-wide spending on all goods and services is growing at its slowest rate for 16 months, according to its monthly business sales indicator. It blamed falling home prices and higher mortgage rates, along with higher petrol prices, for the moderation in spending, which grew just 0.2% in September.

Property analysts now believe the situation will get worse before it gets better.

Domain’s senior research analyst, Nicola Powell, said: “I think this is what we are going to see for Sydney for the rest of the year. The slowing nature of the auction market suggests the downturn has yet to hit a peak with further price softening ahead.”

Australia’s housing boom is not heading for a soft landing. How did we get here? | Greg Jericho

Read more

Andrew Wilson, chief economist at My Housing Market, said sellers were now facing the “toughest market conditions since the economic shock of the GFC flattened activity 10 years ago”.

Wilson, a former chief economist at Domain, has joined ranks of high-profile forecasters such as Oliver, who are now predicting more trouble ahead.

Damian Collins, managing director of Momentum Wealth in Perth, said the lending constraints imposed on the banks by regulators and in the wake of the royal commission into financial services was having far greater impact than first thought.

“Affordability was stretched in Sydney and Melbourne when credit was high,” he said. “But now it’s harder to borrow money.

“People just can’t borrow what they used to be able to and I think the government will have to allow the banks to loosen their credit otherwise Sydney and Melbourne could see significant falls.”